This blog posts answers to questions given to us by ministers and others serving in Christian ministries advancing the gospel of Jesus Christ. It also discusses other financial topics that those in gospel ministries face. We trust the information provided can be helpful to you.

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1. Employees get a 2% raise with their first 2011 payroll checks. The Tax Relief Act of 2010 reduces the employee-share of the FICA tax by 2%

2. Provisions set to expire on December 31, 2010, related to sales tax, educator, tuition, contributions, mortgage insurance premiums, and student loan interest deductions, and some related to the Earned Income and Child Tax Credits were extended by the Tax Relief Act. An energy credit for individuals was also reinstated, but at a lower rate.

4. While it received a lot of negative press, the Health Care Reform Act of 2010 contained provisions that may benefit individuals including tax credits and increased benefits for employees' adult children.

5. The Small Business Jobs Act of 2010 increased some business write-offs and created additional Roth Account conversion opportunities for individuals.

What do we do with post-dated checks or checks that arrive in the offering box in January with a December date on them? If a contribution is postmarked by the 31st of December, I assume we are required to include that figure in our 2010 tally? Is there anything else we should know about the reporting of contributions?

Answers:

Make sure to check collection boxes, if any, prior to the close of the year. Checks that are received by the church prior to January 1 are included as 2010 contributions as long as the funds are available to the charity. A post-dated check (after December 31) must be posted as 2011, even if a 2010 date is recorded on it, since it cannot yet be deposited. Checks received via US Mail postmarked by December 31 should be recorded for 2010.

Make sure to provide date and amount for any individual contributions greater than $250. A simple total for the year is appropriate unless additional notation is necessary to list these larger amounts. Many churches simply …

Question:You have covered in several previous posts the question of whether contributions made in support of mission trips are deductible. Here's a question with a slightly different slant.

If a congregation member, who is a member of a mission team and travels with that team, purchases supplies, food, or other “goods” for the trip and those supplies are used directly and immediately for the purpose of the trip (in other words, they do not run those contributions through the church), will that person be able to deduct those as contributions, assuming they have supporting documentation? Will they have to get some kind of statement from the church in support of those contributions? Would they claim these on Schedule A, assuming they itemize?

Answer:

IRS Publication 526 offers some good help to answer this question."Although you cannot deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualifie…

Three pastors of a congregation receive a housing allowance and no actual wage. Can a Health Reimbursement Arrangement be made available to a pastor who's only compensation is a housing allowance?

Answer:

A minister whose compensation is designated 100% as housing allowance is still considered an employee eligible for all statutory fringe benefits that other workers enjoy.

Question:

It is understood that HRAs cannot be taken through voluntary salary reductions. May a church have an agreement with a pastor that he receives a monthly HRA that, if unused, is designated as a housing allowance instead?

Answer:

Since an HRA must be 100% funded by employer contributions, it is not considered taxable compensation. The plan may be established to permit unused amounts to roll over into a subsequent year. However, to distribute amounts contrary to the design of HRAs places the whole arrangement in non-compliance. IRS Publication 969 makes this quite clear:

A New York City church has been handling all its church finances through volunteers, but the work is getting overwhelming. It is considering hiring an outside firm/person to handle all church finances- reimbursements, writing checks, payroll, bookkeeping. Is this a good idea? What is a reasonable price?

Answer:

The bookkeeping function for volunteers has always been, in my opinion, the most time-demanding volunteer responsibility in most churches. When most churches reach a point of advanced time and expertise requirements they seek to hire help rather than to continue using volunteers.

Of course, some functions cannot nor should be "farmed out." The confidentiality and security required for offering counts and deposits typically means that volunteers will continue performing these duties. Maintenance of donor records often stays under the watchful eye of church members. Of course, processes to approve invoices for payment and to set compensation arrangements must be o…

Corey Pfaffe

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This information is provided as a service of MinistryCPA.org to ministers and Christian ministries. Please contact me or your personal professional advisor to determine how this information may apply to your own situation.